petroecuador
Thursday, April 29th 2010
Last week, we posted a blog entry that detailed two recent Petroecuador spills. In the post we asked why the Amazon Defense Front, Amazon Watch and the Rainforest Action Network have never condemned Petroecuador for the company’s spills and ongoing environmental mismanagement.
After learning about the spills, these groups, who claim to “work to protect the rainforest and advance the rights of indigenous peoples in the Amazon Basin” largely remained silent. No press releases issued. No press conferences held. No campaigns mobilized. No lawsuits filed. Instead, only Amazon Watch spoke up, choosing to respond by blog post. Below is an excerpt from the posting, where the author states that the Amazon Defense Front has in fact gone after Petroecuador:
“First of all, the Amazon Defense Coalition – or the Frente – as well as indigenous groups throughout the area have in fact gone after Petroecuador and other oil companies operating in the region on numerous occasions, demanding clean-up of spills, and a general increase in responsible operations.”
This is a dubious claim as we know of no instance in which the Frente has taken on Petroecuador for its operational practices. In fact, a lawyer for the Frente, Pablo Fajardo, is on the record calling for Petroecuador to stop its long overdue remediation work in the region because it was hurting his case against Chevron. The Frente assuming such a position is not especially surprising since it is the named financial beneficiary of the lawsuit in Ecuador. Moreover, another lawyer for the Frente, Cristobal Bonifaz, told reporters in Ecuador that his clients had provided a sworn declaration to the government of Ecuador that they would refrain from suing Petroecuador in return for the government’s assistance with their lawsuit.
Meanwhile, Amazon Watch has continually turned a blind eye to events in Ecuador. Could that be explained by the fact that Amazon Watch has been continually funded by the American trial lawyers suing Chevron? Could this ongoing financial relationship also explain why Amazon Watch has never called on Petroecuador to clean up its portion of the oil fields, as the company has repeatedly promised to do?
Rather than provide factual information to support its claims, Amazon Watch resorts to the “trust us” retort.
Until there is evidence of these groups going after Petroecuador, one has to question if these lawyers and activists really are advocates of the environment and the indigenous people they claim to represent. Maybe they are more interested in taking Chevron to the cleaners than actually cleaning up the Amazon.
Tuesday, April 27th 2010
The Amazon Defense Front’s public relations efforts have been in high gear trying to discredit a Columbia Journalism Review critique of “60 Minutes” coverage of the Ecuador lawsuit. In doing so, the Front’s spokesperson, Karen Hinton, has misrepresented the factual record as it relates to a particular well site, Shushufindi-38.
Shushufindi-38 entered production in 1974 and was ultimately shut down in 1984. To hear Ms. Hinton tell the story, that’s where the history ends. Yet, her claim that Petroecuador, Ecuador’s state-owned oil company, did not have any operations at the site after 1992 is false.
The Front ignores the fact that in 1994, and after the expiration of the Petroecuador-Texaco Petroleum Consortium, Petroecuador converted Shushufindi-38 to an injection well, a type of well that returns byproducts from oil production to the geologic formations from where they came. In fact, 119 pages of Petroecuador maintenance logs demonstrate ongoing Petroecuador activity at the site as recently as 2008. Petroecuador was performing maintenance at Shushufindi -38 in November 2005 on the very day that a judicial inspection of the site was to occur. The Front was at the inspection and witnessed Petroecuador’s work first hand and yet continues to make inaccurate statements.
Shushufindi-38 remains in operation today. However, that is not the limit of Petroecuador activity at the site. Indeed, since at least 2007, Petroecuador has been performing remediation work at the site. Why? Because the site was not assigned to Texaco-Petroleum as part of the company’s remediation program. Rather, as Petroecuador acknowledges, it is solely responsible for any remediation or clean-up efforts required at Shushufindi-38. The ongoing work at the site was captured by a Reuters photographer earlier this year.
Ms. Hinton’s Shushufindi-38 media missives also point to existing hydrocarbons at the well site. The presence of oil at an active Petroecuador well site should come as no surprise to anyone, and further explains why Petroecuador is in the process of cleaning up the site. Moreover, Petroecuador’s extensive and ongoing maintenance work at Shushufindi-38 explains why the reserve pits at the site remained active and contained freshly deposited crude at the time of the judicial inspection.
Likewise, Ms. Hinton has been highlighting for the media the dubious scientific results the plaintiffs’ lawyers claim came from analysis of soils at Shushufindi-38. Putting the Front’s misrepresentation of regulatory standards aside, the plaintiffs’ analytical results simply confirm what is already common knowledge, and common sense – that Petroecuador needs to complete its remediation of the site.
The Front’s denial of more than 16 years of Petroecuador activity at Shushufindi-38 is disingenuous. The truth about Shushufindi-38 is well-documented and Petroecuador’s ongoing clean-up at the site is simply further evidence that Petroecuador is responsible for remediating Shushufindi-38. Promoting outright falsehoods in an attempt to sway public opinion, as the Front and Ms. Hinton repeatedly do, helps no one, least of all the people of Ecuador’s Amazon. The Front needs to stop its campaign of misrepresentations, and come clean about Shushufindi-38 as well as its meritless lawsuit.
Wednesday, April 21st 2010
In the space of a week, a Chevron technical team has discovered two fresh oil spills in Ecuador’s oil-producing Amazon region. One covers three hectares (7.4 acres) near state-owned oil company Petroecuador’s Guanta production station in the heart of Cofan indigenous country. The other impacts half a hectare (1.2 acres) in the Sacha field, an area operated by the Rio Napo joint venture. The spill is near the village of San Carlos where plaintiffs’ lawyers and activists claim oil has caused an outbreak of health problems.
Yet the Amazon Defense Front, Amazon Watch and the Rainforest Action Network – groups backing a meritless lawsuit against Chevron – have said nothing. Despite claiming to advocate on behalf of the environment and the people of Ecuador’s Oriente, there have been no expressions of outrage. No denouncements of the companies operating in these areas. No indignant press releases. No press conferences. And, of course, no lawsuits.
April 17_2010: Photo facing northwest. General view of Petroecuador’s spill
April 17_2010: Photo facing southeast showing a berm built to dam fluids as part of the remediation activities by Petroecuador in the spill area located approximately 1 km North of Guanta Production Satation.
April 10_2010: Remediation activities of recent Petroecuador oil spill from production line near San Carlos.
April 10_2010: Remediation activities of recent Petroecuador oil spill from production line near San Carlos.
Location of Recent Oil Spills Occurred in the Former Petroecuador-Texpet Concession Area
Yet this behavior is consistent with an ongoing pattern of ignoring the conduct of Petroecuador and opposing Petroecuador’s clean-up efforts. Given their track record, one has to ask if these lawyers and activists are really advocates of the environment or the indigenous people they claim to represent?
It very well may be that the Amazon Defense Front, Amazon Watch, and the Rainforest Action Network are more interested in taking Chevron to the cleaners than actually cleaning up the Amazon.
Thursday, March 11th 2010
On Thursday, a U.S. judge granted Chevron’s motion to dismiss the government of Ecuador’s attempt to block the company’s international arbitration claim from proceeding. In his decision, Judge Sand declined to stay international arbitration in a dispute between Ecuador’s government and Chevron. Stating in his ruling that, “a stay of arbitration is inappropriate.”
Chevron is pleased that the Bilateral Investment Treaty arbitration can proceed. Chevron is seeking to hold Ecuador and its government owned oil company, Petroecuador, to the promise they made to complete the environmental cleanup of the Amazon.
Texaco Petroleum did its share of the cleanup as promised, and Petroecuador now needs to own up to its promises and address the environmental problems wrongly being blamed on Chevron.
Only the international arbitration panel can bring Ecuador to the table and compel Petroecuador to do the right thing and clean up its oil fields. With today’s decision, we are one step closer to making that a reality.
Friday, February 12th 2010
Earlier in the week it was revealed that the author of a report recommending Chevron pay $27 billion in damages has a conflict of interest that he illegally hid from the court. As it turns out, Richard Cabrera, the report’s author, is the majority owner of an oil field remediation company in Ecuador that stands to gain financially from a judgment against Chevron.
Cabrera has suggested a wholly illegitimate and unsubstantiated damage recommendation against Chevron in excess of $27 billion. Cabrera was not only paid solely by the plaintiffs, but he openly relied on them to staff his effort while seeking to obstruct Chevron’s representatives from even observing his work. In fact, major portions of his submissions to the court are cribbed from the plaintiffs’ own submissions, if not written by them directly. His work product is devoid of scientific content, lacks even the most basic evidentiary support, and assesses monetary relief for alleged environmental damage and health claims he has never even bothered to investigate, inspect, or verify.
In addition to those outlined above, below is a list of other Cabrera Report flaws:
Lack of Causation
Cabrera completely ignored his court-ordered mandate to determine causation and chronology of environmental conditions. Instead, he just arbitrarily assigned liability to Texaco for every instance of alleged environmental impact in the former concession areas. By ignoring chronology and causation, Cabrera even makes Texaco liable for environmental impact caused solely by Petroecuador in the last 20 years.
Failure to Inspect and Falsifying “Evidence”
Cabrera ignored court orders that he must inspect every site, visiting only 48 of 316 wells and one of 19 production stations. Instead, Cabrera reviewed aerial photos to identify pits and used those photos incompetently and dishonestly. For example, Cabrera submitted certain aerial photos with his report and declared that various items in the photos — like trees, tanks and shadows — were pits. He also submitted photos of pits constructed by Petroecuador after 1990, backdated the photos to the 1970s and declared that the pits were constructed earlier by Texaco Petroleum. Cabrera, therefore, fraudulently overstated the number of pits.
Arbitrary Determination of Remediation Scope
With no justification, Cabrera arbitrarily concluded that 80 percent of well pits and 100 percent of production station pits need to be remediated, regardless of past or current remediation efforts. Cabrera then further fabricated and overstated the magnitude of remediation required for each pit, arbitrarily assuming that each pit needs to be remediated to a depth of four meters (13.12 ft) and that an additional area around each pit equal to 50 percent of the pit surface area also needs to be remediated.
Gross Overstatement of Remediation Cost
Cabrera grossly overstated the cost to remediate pits. Though Petroecuador has been remediating pits to Ecuador standards for approximately $85,000 per pit, Cabrera recommends remediation costs of $2.743 billion — over 150 times the Petroecuador budget of $18 million for this work.
For more information on other elements contained within Cabrera’s $27 billion damage report, please use the following hyperlinks.
It is clear the Ecuadoran court handling the lawsuit against Chevron has abandoned the due process guarantees mandated by Ecuadorian law, eliminated the plaintiffs’ burden of proof, and substituted in its place the work of Richard Cabrera. Chevron has consistently argued that it is not getting a fair trial in Ecuador. Evidence presented to the court shows Texaco Petroleum’s remediation was thorough and complete. The Amazon Defense Front has teamed up with the government of Ecuador to try to shift the liability of Petroecuador to Chevron by pressuring the company into an unjust settlement using a biased and improperly influenced court and a partisan and unqualified “independent” analyst.
Thursday, February 11th 2010
New revelation of a conflict of interest for the author of a report recommending that Chevron pay $27 billion in damages in the long-running trial in Ecuador has prompted a deliberately misleading response from the Amazon Defense Front, which is the named financial beneficiary of any judgment in the case.
Cabrera has a previously undisclosed majority ownership interest in a company registered to do business with Petroecuador. Petroecuador is the state owned oil company, chief polluter in the region, and beneficiary of Cabrera’s “findings.” This evidence raises additional, serious questions about Cabrera’s independence and completely undermines the integrity of his report.
Seeing its potential payday at risk, the Amazon Defense Front scrambled to respond via press release. While attempting to sidestep the issue, the Amazon Defense Front does not deny that Cabrera improperly failed to disclose his conflict of interest at the time of his appointment or thereafter. Nor does the Amazon Defense Front deny that had Cabrera’s ownership interest been properly disclosed, it would have been disqualifying. Below is a response to four of the many misleading and inaccurate statements from the Amazon Defense Front press release:
“Cabrera disclosed to the court that he owned a clean-up company before his appointment as Special Master. This fact was properly cited by the court as one of the reasons he was qualified to do the damages assessment.”
This is a yet another of the Amazon Defense Front’s blatant attempts to mislead the public.
Exhibit 4 from the filing contains everything that Cabrera has disclosed. Nowhere does Cabrera disclose the fact that he was a co-founder, general manager, majority stockholder, and legal representative of CAMPET at the time of his appointment as an “independent” technician or during his work for the court. CAMPET is a soil remediation company and preapproved contractor to Petroecuador. Cabrera affirmatively swore to the court that he had no conflicts of interest. This has shown to be untrue by virtue of his financial interests in CAMPET.
The Amazon Defense Front’s statement is intended to misrepresent Cabrera’s disclosure about working for a different remediation company, CONGEMINPA, prior to his appointment. Cabrera disclosed that his work with CONGEMINPA ended in 2003, and Cabrera had also sold all of his stock in GONGEMINMPA in 2003, years before his 2007 appointment in this case. This past connection to a remediation company did not present a conflict of interest at the time of his appointment. The Amazon Defense Front’s statement is meant to create the false impression that Cabrera disclosed his interest in CAMPET, the company he continued to own, manage, and legally represent during his entire tenure as a supposedly “independent” expert in the case. But he did not make any such disclosure. In fact, German Yanez, the judge who appointed Cabrera, told Dow Jones Newswires Feb. 9 he didn’t know about CAMPET or whether the company’s registration as a bid contractor for Petroecuador constituted any conflict of interest.
“All I know is what I saw in his curriculum (vitae),” said Yanez. “If there’s missing information, I don’t know why.”
“Chevron thought so highly of Cabrera’s qualifications that it accepted him as a court-appointed expert in an earlier part of the case and paid his fees as required by court rules.”
This is factually incorrect.
Cabrera was appointed by the court in an earlier phase of the trial, but he performed no work and at no time has Chevron paid Cabrera for anything. On the contrary, the plaintiffs paid Cabrera more than $200,000 for his subsequent work.
Chevron has repeatedly and unwaveringly questioned Cabrera’s qualifications since his original involvement in the case, has opposed his report, and has repeatedly told the court that his damages assessment is without basis, is biased, and was developed with and co-written by the plaintiffs. At no time has Chevron ever “thought highly of Cabrera’s qualifications” to be an expert in this case.
“The fact Cabrera’s company is qualified to bid on clean-up contracts offered by Ecuador’s state-owned oil company is irrelevant. That company, Petroecuador, is not a party to the case against Chevron and would have no role in any eventual cleanup.”
This is factually incorrect.
Petroecuador was the majority partner in the consortium and is responsible for every site in question. Moreover, no remediation work in the oil producing region could occur without Petroecuador’s active involvement, participation, and authorization. Simply put, nothing could happen in Petroecuador’s oil fields, including a remediation ordered by the court, without Petroecuador.
Meanwhile, the government of Ecuador has already acknowledged that it expects to participate in any prospective remediation work. At a September 2009 press conference, Ecuador’s Prosecutor General, Washington Pesantez said, “Although I don’t have the exact figures, 10 percent would go to the plaintiffs if Chevron is found guilty; 90 percent would be delivered to the State for remediation or bio-remediation activities that would serve to correct biologic and chemical mechanisms…”
In addition, “the fact Cabrera’s company is qualified to bid on clean-up contracts offered by” Petroecuador is extremely relevant: — Cabrera’s report attempts at every turn to exonerate Petroecuador for 20 years of sloppy practices. In his report Cabrera exonerates Petroecuador of the current environmental conditions in the region, grossly inflates the scope of remediation and costs of the work, and even calls on the court to award $375 million to upgrade Petroecuador’s infrastructure. Cabrera’s company’s registration to do work for Petroecuador provides the perfect incentive for Cabrera to go to such absurd lengths to lavish benefits on Petroecuador in his report, and the perfect opportunity for Petroecuador to return the favor.
“Cabrera by virtue of his role in the case would be barred from having a role in a future clean-up.”
This statement is inherently contradictory and is made without any factual support. First the Amazon Defense Front says there is no conflict at all, and then it says that Cabrera does indeed have a conflict of interest. His financial stake in remediation explains why Cabrera, on at least ten different occasions, concealed from the court his conflict of interest — a violation of Ecuador law. Accordingly, Cabrera’s report should be rejected and Cabrera’s connection to Petroecuador should be investigated.
Chevron has consistently argued that it is not getting a fair trial in Ecuador. Evidence presented to the court shows Texaco Petroleum’s remediation was thorough and complete. Amazon Defense Front has teamed up with the government of Ecuador to try to shift the liability of Petroecuador to Chevron by pressuring the company into an unjust settlement using a biased and improperly influenced court and a partisan and unqualified “independent” analyst.
Tuesday, February 9th 2010
Chevron has revealed new information showing that the author of a report recommending the company pay $27 billion in damages has a conflict of interest that he illegally hid from the court. As it turns out, Richard Cabrera, the report’s author, is the majority owner of an oil field remediation company that stands to gain financially from a judgment against Chevron.
Records from 2003-2008 show that Cabrera is co-founder, general manager, majority stockholder, and legal representative of an oilfield remediation company, CAMPET, which is registered to perform oilfield remediation and other services for Petroecuador. Cabrera failed to disclose these business interests as required by law.
In his report, Cabrera absolves Petroecuador of any responsibility or remediation obligations associated with past or present oil operations. Yet, Petroecuador was the majority owner of the Petroecuador-Texaco Petroleum consortium which operated until mid-1992. Moreover, there is substantial evidence that Petroecuador has spilled millions of gallons of oil since taking over exclusive ownership and operations.
Instead, Cabrera exclusively attributes pollution in the Amazon region of Ecuador to Texaco Petroleum, now owned by Chevron. Cabrera’s report says Chevron, because it acquired Texaco Petroleum in 2001, is solely liable for $27 billion in damages, citing grossly inflated remediation costs while ignoring Petroecuador’s role in oil operations and its well-documented poor environmental performance. These findings make no sense as a matter of Ecuadorian law or common sense, but are consistent with furthering the interests of Petroecuador, as well as Cabrera’s.
Not only did Cabrera hide his financial interests in the remediation company, he affirmatively represented to the court that he did not have any impediment or conflict that would affect his performance as an “independent” court-appointed witness. Moreover, Cabrera knowingly omitted his interest in CAMPET, as well as CAMPET’s status as a registered Petroecuador contractor, in his submissions to the court. Finally, Cabrera further misled the court by accepting his appointment, which required an explicit acknowledgment of his duties to the court as an impartial analyst—something Cabrera could not have done in good faith, given his financial interests.
Due to the remediation company’s relationship with Ecuador’s state-owned oil company, Petroecuador, Chevron has called upon the court to immediately reject the work of Richard Cabrera on the grounds that he knowingly hid his relationship and that he stands to gain from what was supposed to be unbiased work for the court.
Thursday, December 17th 2009
U.S. trial lawyers representing 48 Ecuadorian plaintiffs (not 30,000) are attempting to hold Chevron liable for more than $27 billion. Amazingly, this astronomical number mostly goes unquestioned. So what goes into creating a figure that is 10 times the cost to remediate the nation of Kuwait post Gulf War?
First, one must consider its origin. The $27 billion was presented by Richard Cabrera, a mining engineer with no oilfield remediation experience. Cabrera was named by the court to assess possible environmental damage in the former concession area and, if any, determine the cause and work needed to fix it. In addition to being unqualified, Cabrera ignored court instructions and improperly expanded his work scope to invent categories of damages unrelated to the issues raised by the lawsuit or with environmental remediation. Not surprisingly, his appointment was fully supported by the plaintiffs’ representatives who ultimately paid Cabrera more than $200,000 for his work. Perhaps most egregious, however, is the fact that Cabrera staffed his technical team with plaintiffs’ representatives and portions of his “independent” report were developed by organizations affiliated with the plaintiffs [click here] and [here].
Following is a breakdown of Cabrera’s fraud:
Pit remediation: Proposed damages ($2.743B)
Petroecuador has publicly acknowledged responsibility for remediation of all existing oilfield pits associated with their nearly 40 years of operations in the Oriente region of Ecuador, including all of the remaining pits in the former Petroecuador-Texaco concession. In 2005, Petroecuador initiated a $121-million remediation program, termed the “Pit Remediation Project of the Amazon District” (PEPDA), with the goal of completing the closure of all pits, spills, and other affected areas in accordance with applicable Ecuadorian regulatory standards by 2010. As of December 2007, the PEPDA program had initiated and/or completed remediation of more than 40% of the 370 open pits identified in the former concession area, with formal inspection and approval by the government regulatory agency, DINAPA (Dirección Nacional de Protección Ambiental). Under a new program, designated UMR (Unidad de Mitigación y Remediación), a successor program to PEPDA, Petroecuador remains committed to completing the remediation of all remaining pits and oil spill areas in the Oriente within the next few years.
In the Chevron case, the plaintiffs have charged that the oilfield pits in the Oriente pose a grave danger to local residents and the environment, and they have demanded that Chevron, whose subsidiary Texaco Petroleum served as a minority partner of Petroecuador nearly 20 years ago, pay the plaintiffs for the cost of remediation – regardless of the fact that these same pits have already been or will soon be remediated by Petroecuador. Indeed, the lead attorney for the plaintiffs, Pablo Fajardo, has even protested the Petroecuador cleanup program, complaining that it is “changing the lawsuit” and “hiding” evidence. In October 2007, he submitted a formal letter to the court demanding that the remediation be stopped.
Coincidentally, Cabrera’s $2.743 billion estimate for pit remediation, over 150 times the Petroecuador budget of $18 million for this work, is based upon a highly inflated unit cost (over 36 times the actual per pit cost reported by Petroecuador) as well as a highly inflated estimate of the number of pits (over 4 times the actual number of oilfield pits remaining in the former concession).
Groundwater remediation: Proposed damages ($3.236B)
Cabrera arrives at this figure with no evidence to substantiate a damage claim. He took NO samples from rivers, streams, wells or potable water sources. His handful of “groundwater samples” in the former concession area, actually come from borings taken from within pit areas and are in no way representative of what geologists or hydrologists would consider groundwater.
Healthcare system: Proposed damages ($480 MM)
While health is a serious concern in the region due to widespread fecal contamination of drinking water, the construction of a health care system is clearly not Chevron’s responsibility, nor has it ever been part of the litigation. Plaintiffs’ attorney Julio Prieto underscored this in a recent Radio Majestad interview when he said, “in the claim we have not requested any health issue in particular.”
It’s the sole responsibility of Ecuador’s government, which encouraged massive migration to the region and failed to provide the most basic sanitation services like sewage treatment.
Impacts on indigenous populations: Proposed damages ($430 MM)
Populations of all indigenous groups in the region have grown markedly throughout the period since oil was discovered in Ecuador’s Amazon. Meanwhile, deforestation and encroachment on indigenous lands by settlers was a direct result of the Ecuadorian state’s colonization policy, not oil development. When oil exploration began in the 1960’s, the population of the region was approximately 25,000 – largely native peoples and missionaries. Today, the region is among the fastest growing in Ecuador, home to more than 300,000 citizens who have converted jungle to agricultural lands at the government’s behest.
Potable water system construction: Proposed damages ($428 MM)
Numerous potable water systems exist in the region, but Cabrera failed to take samples from them. Likewise, Cabrera failed to sample rivers, streams, or wells. So, how does he know more potable water systems are needed? And how does he justify holding Chevron liable for creating a potable water system for the entire region when the main problem with drinking water is bacterial – not hydrocarbon – contamination?
Petroecuador’s infrastructure: Proposed damages ($375 MM)
Ecuador’s government and state took in approximately $25 billion over the 20-year life of the consortium. Texaco Petroleum earned $490 million, its contract expired in 1992 and it left Ecuador after successfully conducting remediation, carrying out social programs and upgrading equipment under an agreement with the state. For two decades, Petroecuador has been exclusive operator of the former consortium oilfields, earning 100 percent of an estimated $50 billion in additional revenue. So, having earned some $75 billion, shouldn’t Petroecuador maintain, replace and build out its own infrastructure?
Excess cancer deaths: Proposed damages ($9.527B)
Neither Cabrera, nor the plaintiffs’ lawyers, have ever presented to the Lago Agrio court the name of a single cancer victim, a single medical report or a single death certificate to substantiate this claim. What’s more, official cancer mortality statistics in Ecuador reveal that, not only are Cabrera’s assertions false, but the cancer rate in the oil-producing region is actually lower than in non-oil producing regions of the country. Finally, the only time a lawyer for the plaintiffs presented specific cancer claims before a court (in U.S. federal court in San Francisco), the claims were thrown out after Chevron showed them to be false. The lawyer, the originator of the Lago Agrio case, was fined $45,000 and sanctioned for the fabrications.
Deforestation of stations, wells and roads: Proposed damages ($875MM-$1.697B)
Ecuador’s government required that the consortium construct roads throughout the region to facilitate the state’s colonization program. Moreover, the total footprint of actual oil operations in the former concession area amounts to roughly 6.8 square kilometers. If roads are included, the footprint grows to just over 44 square kilometers. This is an important fact to consider in a concession area of 4,429 square kilometers that produced approximately $25 billion for the Republic of Ecuador.
Unjust enrichment: Proposed damages ($8.421B)
Central Bank figures show that Texaco Petroleum earned $490 million while the Republic of Ecuador received, through taxes, royalties, internal market subsidies, dividends from Petroecuador’s majority stake and other revenue, approximately $25 billion during the 20-year consortium.
Problems with Cabrera’s work are not limited to his absurd damage recommendations. The reports themselves are filled with mathematical and scientific errors. On a number of occasions he simply fabricates evidence. He gathered much of his “evidence” with the help of the plaintiffs’ technical team. He copied into his reports whole blocks of text from the plaintiffs’ court filings to justify some of his most outlandish assertions, such as his cancer claims and the remediation estimates. He fails to mention Petroecuador’s responsibility for environmental problems in the region despite its 62.5-percent majority stake in the consortium and its status of exclusive operator in the former concession area for almost 20 years.
Cabrera also fails to acknowledge Texaco Petroleum’s $40 million remediation related to its approximate one-third stake in the consortium, or the 1998 release from future claims granted to the company by the government and Petroecuador. Finally, the court’s appointee is unconstrained by the fact that the plaintiffs are suing Chevron strictly for environmental remediation costs. “So,” you may ask, “with all of the above in mind, how could a law-abiding, fair-minded, and independent court allow such absurd damage claims stand as the basis for a verdict?” The answer is, “a law-abiding, fair-minded, and independent court couldn’t.”
Thursday, November 5th 2009
The U.S. trial lawyers behind the environmental lawsuit in Ecuador consistently assert that Chevron, a company that has never operated in Ecuador, is somehow responsible for the current state of Petroecuador’s environmental mismanagement. Moreover, when confronted with the reality of Petroecuador’s reckless performance over the last two decades, the lawyers try to claim that Petroecuador’s pollution is Chevron’s responsibility because (as they put it) Petroecuador “inherited” a “flawed production system” from Texaco Petroleum.
Such claims are patently false.
(1) It is well documented that Texaco Petroleum, now a fifth tier subsidiary of Chevron, operated in Ecuador as a minority partner with state owned Petroecuador. All consortium decisions were made jointly by Petroecuador, the Government of Ecuador and Texaco Petroleum. In fact, the system that Petroecuador assumed full responsibility for in 1992 was constructed in a manner consistent with applicable Ecuadorian regulations and with industry practices that are still in use in many places in the world today.
(2) In the last two decades, Petroecuador has spent over a billion dollars to more than double the size number of wells in the concession area. In an effort to increase oil production, Petroecuador has drilled more than 400 wells, which represent a cost of more than $1.2 billion and performed thousands of well workovers (250 at an approximate cost of $170,000 each in 2009). Yet, Petroecuador has spent little on corrosion prevention and maintenance which is critical to prevent oil spills. They also continue to use unlined pits, having constructed at least 270 pits (over 90% of which are located in the former concession area) in the last 3 years.
Montage of Ecuador media headlines showing numerous spills.
In the early 1990’s, after the Government of Ecuador made the decision not to renew the concession agreement, Texaco Petroleum spent $40 million remediating its share of the consortium operations. The Government of Ecuador then signed off on this remediation and granted Texaco a full release of liability from any future claims. Petroecuador has repeatedly acknowledged that it is their responsibility to remediate the rest of the sites in the concession area including “all of the pits.”
Since assuming complete control over Oriente oilfield operations, Petroecuador’s operations have generated over 1.2 billion barrels of crude oil and 260 million cubic feet of natural gas, representing a market value of over $57 billion. While the company has recently funneled more than a billion dollars into drilling new wells to maximize oil profits, they have spent little on environmental remediation and socioeconomic projects in the area. The lack of spending on maintenance and proper safeguards against spills has led to crumbling flowlines and pipelines, which has resulted in a deplorable record of oil spills.
Despite Petroecuador’s ongoing pollution, neither the Amazon Defense Coalition nor Amazon Watch has made Petroecuador a focus of their Oriente clean-up campaign, and they have never pursued any legal action against the state oil company. In fact, when Petroecuador began remediating pits in 2006, the Amazon Defense Coalition demanded that the company stop their long awaited cleanup plans as these efforts were “changing the lawsuit.”
While the U.S. trial lawyers and their partners consistently portray Petroecuador’s ongoing environmental mismanagement as the responsibility of Chevron, it is clearly not. The facts are clear – Texaco Petroleum acted responsibly and cleaned up its share of the consortium years ago, while the Government of Ecuador and Petroecuador have chosen profits over environmental stewardship.
Friday, October 23rd 2009
Chevron is being blamed for a situation that is the sole responsibility of the Ecuadorian government and Petroecuador.
Petroecuador, Ecuador’s state-owned oil company, was the majority partner in the consortium with Texaco Petroleum. Today, Petroecuador still owns and operates the oilfields in the former Concession area as well as other fields in the Amazon. Petroecuador took over consortium operations in 1990 and became the sole owner of the consortium fields and installations when Texaco Petroleum’s concession contract expired in 1992. Since that time, Petroecuador has developed a widely acknowledged record of operational and environmental mismanagement, due to, among other things, widespread corruption, a lack of investment in, or proper maintenance of its equipment and installations, and numerous spills.
Petroecuador’s environmental record is alarming. The company has been responsible for more than 1,400 spills between 2000 and 2008. According to media reports, Petroecuador has spilled over 4.4 million gallons of oil at oil production and storage sites and along its various pipelines.
Meanwhile, Petroecuador has significantly increased the footprint of oil operations within the former consortium fields. For instance, the company has drilled more than 400 new wells since taking over while the consortium operated 321 wells. Likewise, Petroecuador has constructed more than 270 new reserve pits in the last three years alone. All the while, the company has largely ignored its obligations to clean up its portion of the consortium operations based on the remediation agreement with Texaco Petroleum.
View a photo gallery or watch a video of Petroecuador’s environmental mismanagement.
Despite Petroecuador’s dismal environmental record, neither the Amazon Defense Coalition nor Amazon Watch has made Petroecuador a focus of their Oriente clean-up campaign, and the plaintiffs and their lawyers have never pursued any legal action against the state oil company. To the contrary, Petroecuador stands to benefit, directly and indirectly, more than any other Ecuadorian entity if the cost for widespread remediation is shifted to Chevron by:
- Forcing Chevron to pay for remediation work that is clearly the responsibility and obligation of Petroecuador, both under the Settlement and Release entered into by Texaco Petroleum, the Government of Ecuador and Petroecuador, and as the sole owner and operator of the former consortium fields for the past two decades.
- Requiring Chevron to refurbish and upgrade Petroecuador’s deteriorating infrastructure even though Texaco Petroleum transferred all of that property to Petroecuador in good operating condition almost 20 years ago and has had no say in any of Petroecuador’s operational decisions since 1992.
See these photographs of Petroecuador’s operations in Ecuador:
Wednesday, October 21st 2009
The judicial system in Ecuador is not fair and is far from independent.
Since assuming office in January 2007, President Correa has consolidated his power over all of Ecuador, including its political, financial, and media institutions:
Correa consolidated political power when the Constituent Assembly, which is dominated by his political party, Alianza PAIS, drafted a new constitution, dissolved the National Congress and announced that its decisions were superior to any other ruling by the judicial system.
He threatened that “[j]udges and tribunals that process any action contrary to the decisions of the Constituent Assembly shall be dismissed from their post and subject to corresponding prosecution” and has since made clear that this threat extends to judges that rule against state interests.
Correa claims that the “Executive Branch [can] exert pressure on the Judicial Branch to get the courts to “respond to the needs of the country” and that, as President, he “is not only the leader of the Executive Branch [but] of the entire State and the State is made up of the Executive, the Legislative, and the Judicial branches.”
Correa has also cancelled foreign corporations’ contracts and seized their assets while simultaneously foreclosing their possibilities for a fair resolution of the disputes by rejecting the jurisdiction of international arbitral tribunals and refusing to comply with their orders. He has also taken steps to control the media, which Correa considers “a corrupt instrument of the oligarchy” and the main “enemy of change,” including threatening to revoke hundreds of radio and television licenses because of alleged “irregularities.”
There is evidence going back to previous administrations that the lawyers representing the Lago Agrio plaintiffs and the Government of Ecuador are working together to ensure a verdict against Chevron in the Lago Agrio lawsuit. The Correa Administration has maintained and furthered this arrangement, converting the lawsuit against Chevron from a legal matter to a political cause.
The Government of Ecuador could benefit greatly from a decision against Chevron, which would absolve it of its own remediation obligations and result in the transfer of an enormous amount of money to Ecuador (the proposed $27 billion judgment would represent half of Ecuador’s GDP). Politically, the Lago Agrio case diverts attention and responsibility for environmental conditions away from Petroecuador and allows Correa to blame all social ills in the Oriente on Chevron.
Correa has publicly prejudged Chevron’s liability in the ongoing case, even taking the unfounded and highly offensive position that Texaco Petroleum was guilty of “crimes against humanity.” Ecuador’s Attorney General confirmed that “the Correa administration’s position in this case is clear: ‘The pollution is the result of Chevron’s actions and not of Petroecuador.’”
Correa has thrown the support of the Government behind the plaintiffs, even offering them “assistance in gathering evidence” against Chevron. In April 2007, just months after assuming office, President Correa took a media tour of the Amazon accompanied by the plaintiffs’ lawyers and representatives, calling plaintiffs’ attorney Pablo Fajardo and Amazon Defense Coalition leader Luis Yanza “real heroes…who have fought for years for their people, their Amazon.” He has also repeatedly referred to Fajardo and Yanza in Ecuador’s national press as “our compañeros” (“comrades”) and his “dear friend[s].”
Correa has called on Ecuador’s Prosecutor General to initiate criminal prosecution against the Chevron attorneys who signed the settlement and release agreements on behalf of Texaco Petroleum. Two previous Prosecutor Generals serving the Correa Administration, called for the criminal charges to be dismissed on three separate occasions. However, the next appointee, Washington Pesántez, then issued baseless indictments despite three earlier opinions that charges be dropped, without pointing to any new evidence, and notwithstanding his earlier opinion, as a District Prosecutor, that found no evidence to support the criminal charges and affirmed the recommendation to dismiss the criminal complaint.
Recently, Correa’s legal advisor, Alex Mera, and Correa’s sister, Pierina, were implicated in a $3 million bribery scheme aimed at guaranteeing remediation contracts that would result from a verdict against Chevron by one of the scheme’s organizers, Patricio García, who stated that he was a political operative for the ruling Alianza PAIS party. García also stated during one of the videotaped meetings that executive-branch lawyers would be sent to Lago Agrio to help Judge Núñez (who was also implicated in the scheme) draft his opinion.
Correa confirmed his alliance with the plaintiffs again after the bribery scheme was revealed, stating unequivocally “[o]f course I want our indigenous companions to win.” And as further proof of the Government’s control over the judicial process, despite repeated claims that the Government has no role in the litigation, Prosecutor General Washington Pesántez announced that he asked Judge Núñez to excuse himself from continuing in the process in order to “ensure that the ruling will not be delayed any longer” and so as not to allow Chevron “to avoid paying the compensation we believe is more than fair because it caused a lot of damage in our country.” Pesántez then confirmed the estimate that “90% [of any judgment against Chevron] would be delivered to the State for remediation and bio-remediation activities.”
Monday, October 12th 2009
“Since Texaco left, Petro[Ecuador] has produced even more damage and many more disasters than Texaco.”
– Pablo Fajardo, member of plaintiffs legal team
Ever wonder why the U.S. trial lawyers in the Ecuadorian Amazon litigation case against Chevron choose to sue Texaco, the minority partner in the consortium that launched the country’s energy industry, and not Petroecuador? After all, Petroecuador, the state owned oil company, was the majority partner and became 100% responsible for the oil production in the concession area in 1992.
Here’s why.
According to Ecuadorian news sources, the plaintiffs’ lawyers in the lawsuit against Chevron promised the Quito government they would not sue Ecuador’s state oil company Petroecuador over environmental damage in the Amazon.
Lawyer Cristobal Bonifaz, one of the architects of the lawsuit, has given written assurances to Ecuador’s government that Petroecuador would be spared a lawsuit if government officials threw their clout behind the plaintiffs.
In a 1997 interview appearing in the Ecuadorian newspaper Hoy, Bonifaz said, “There is no reason for the Government to worry because the plaintiffs and their lawyers have undertaken in legal documents to refrain from suing the Government if it is ultimately held to be jointly liable with Texaco for the environmental damage caused.”
A week later, Bonifaz told the Ecuadorian newspaper El Comercio, “I delivered notarized documents to the Attorney General confirming the indigenous people’s commitment to refrain from suing the Government.”
However, none of the plaintiffs’ attorneys have ever reported this arrangement or provided these documents to the Superior Court of Nueva Loja, which is overseeing the current trial. Nor have Chevron’s attorneys been able to obtain a copy.
Instead of taking on Texaco Petroleum and Petroecuador, U.S. trial lawyers have sought to sue only Chevron for environmental issues they say were left behind in Ecuador by Texaco (which Chevron acquired in 2001). Moreover, they knowingly ignore Petroecuador’s ongoing pollution and environmental mismanagement.
Meanwhile, the case in Ecuador has been marred by excessive government interference – interference that has prompted a warning by the U.S. government trade representatives.
Tuesday, September 22nd 2009
Petroecuador, Ecuador’s state-owned oil company, which has a record of environmental mismanagement, continues to drill wells and dig new waste oil pits in the concession area developed in a consortium with Texaco Petroleum.
New information reveals that Petroecuador has drilled more than 400 new wells in the concession area since it took over operations in 1990 – more wells than it drilled in the consortium with Texaco Petroleum between 1972 and 1990. Petroecuador has also dug more than 270 pits in the last 3 years alone.
While activist groups and the plaintiffs’ attorneys in the lawsuit against Chevron claim their desire is to have environmental damage in the Amazon remediated, they have failed to pursue Petroecuador for its responsibilities. They have even opposed Petroecuador’s efforts to remediate pits, fearing such actions might compromise their lawsuit. In fact, the plaintiffs’ local attorney, Pablo Fajardo, was quoted in an interview with La Hora on October 20, 2006 demanding that Petroecuador stop its remediation claiming it was altering his case.
Petroecuador has realized more than $70 billion in revenues over the course of its operations. Very little of those funds have been reinvested to maintain their equipment to prevent spills and remediate pits, or to help the local communities. Instead most of the profits went to the government and toward drilling new wells.
Since it took over operations in 1990, Petroecuador has:
• Been responsible for more than 1,400 spills between 2000 and 2008
• Spilled over 4.4 million gallons of oil
• Admitted it needs to clean up 370 consortia era pits in the concession
View a photo gallery or watch a video of Petroecuador’s environmental mismanagement.
Tuesday, July 21st 2009
FICTION:
“Well, our clients never released Texaco.” – Steven Donziger, 60 Minutes, May 3, 2009
FACT:
The U.S.-based trial lawyers in the lawsuit against Chevron claim their clients never signed-off on Texaco Petroleum’s remediation, giving them standing to sue the company.
Mr. Donziger fails to mention, however, that this could have never been the case, because the remediation work was conducted on State-owned lands and was reviewed and approved on behalf of the plaintiffs, and every other Ecuadorian citizen, by Ecuadorian officials. According to the law, Ecuadorian officials represent all Ecuadorian citizens. Otherwise any release would have required the individual consent of every Ecuadorian. Mr. Donziger also fails to mention that none of his 48 clients have filed claims for personal injury or property damage.
When the oil production concession between Texaco Petroleum and Petroecuador ended in 1992, Texaco Petroleum agreed to perform a $40 million remediation program to remediate sites mutually agreed to by both parties and the Government of Ecuador.
During the remediation, dozens of government inspectors, laboratory personnel, and State representatives reviewed the remediation and granted Texaco Petroleum, and all its respective principals and subsidiaries, a full and complete release from any remaining environmental liability.
In addition, four different lawsuits for environmental harm that were filed in 1994 by the municipalities of la Joya de los Sachas, Shushufindi, Lago Agrio and Orellana were settled in 1996. The jurisdictions of these municipalities cover the entire area of the former concession. All four settlements were approved by Ecuadorian courts therefore putting an end to any future environmental claim on those territories under the jurisdiction of such municipalities.
Click on map for larger image:
At the time, under Ecuadorian law, only the government had the right to bring claims for environmental impacts to the state-owned land where the oil operations took place. Another problem for Mr. Donziger and his colleagues was that they could not file an American styled class action as they do not exist under the Ecuadorian law system. So, according to press reports, they lobbied Ecuador’s legislature and convinced officials to write a new law to allow collective lawsuits for damages by private citizens when environmental harm had been caused. In 1999, a year after Texaco Petroleum completed its remediation and was granted a full release by the government, the Environmental Management Act (EMA) was passed.
Still, the 1999 EMA cannot be applied retroactively to a matter already fully settled with the Government of Ecuador. Moreover, the EMA does not grant the clients of Mr. Donziger or any individual “the right” to unrestrictedly sue for environmental harm. This “right” can only be exercised to the extent that plaintiffs have sustained a direct harm (no such claim has been made or proven by any of the 48 plaintiffs). Thus, the plaintiffs are trying to improperly apply the 1999 EMA law in an attempt to extort a settlement from Chevron.
Wednesday, May 27th 2009
The Amazon Defense Coalition, the financial beneficiary of the lawsuit in Ecuador, issued a press release on 5/8/09 regarding a waste pit at Shushufindi-38 near Manuel Salinas’ home. The release alleges that Mr. Salinas’ water well is contaminated, and Texaco Petroleum was to blame.
In fact, Texaco Petroleum remediated all of the pits it was responsible for. Petroecuador is responsible for remediating the Shushufindi-38 site, and began that remediation in 2007. In addition, Petroecuador can be seen here performing a work-over (work-overs are major repairs or modifications to a well) on the site as recently as November 17, 2005 (others occurred in 1991, 1993, 1994 and two in 2002, all after Petroecuador assumed responsibility for Sushufindi-38.) In 2005, both parties sampled Mr. Salinas’ well and found that the water met USEPA drinking water standards for hydrocarbons and metals.
Click here to view Chevron’s point-counterpoint rebuttal to the charges contained within the press release.
